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Many of our recent bankruptcy clients report large amounts of business debt.  This may be small business loans, credit cards run up to support a small business, or personal guarantees.  Often the business is gone at this point and we are looking to file an individual bankruptcy.  Filing a bankruptcy for a dissolved business is often an unnecessary and risky expense.

Sometimes our debtor client is married, and their spouse remains unaffected by the bankruptcy.  Their marriage alone often provides the basis to protect their personal or real property by using a special exemption called Tenancy by the Entireties.  In Florida, our homestead laws are quite broad and serve to protect the home.  Most IRAs, SEP IRAs, 401ks and other retirement assets are fully protected as well.  If the amount of business debt exceeds the consumer household related debt, our clients do not even have to comply with the rather stringent Means Test imposed by Congress in the bankruptcy reform act passed a few years back.

Business creditors are also often some of the most aggressive.  They figure if you once made money, you will again one day.  So they sue and obtain a judgment.  But if you file bankruptcy at a low point in your life, you truly can start over.  You can file bankruptcy whether or not the creditor has already obtained a judgment.  It’s discharged all the same.

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One common myth is that the prior property owner will receive the surplus of any bid over the unpaid taxes.  It’s possible, but not that likely.  The order of priorities for any surplus is:

  1. Government agencies with liens on the property;
  2. Mortgage holders and other lien holders in order of date priority;
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quiet-title2Do I need to have possession to quiet title to property?

No, in fact there is a process whereby we can file a Complaint for Unlawful Detainer along with the Quiet Title Action following a foreclosure sale or tax deed sale for instance.  You do not need a separate eviction and you do not have to wait for the person to be out before you file to quiet title.

How long following a judgment against a mortgage company must I wait to quiet title?

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Do you realize that if you are constantly robbing Peter to pay Paul and cannot ever get ahead, you could be debt free by the holidays if you qualify for a Chapter 7.  Many clients who come to see us have been struggling with debt for a long long time.  No one rushes to file bankruptcy.  Most everyone tries to pay their bills until they finally can’t.

But a Chapter 7 case takes less time start to finish than traffic court in many cases.  Of course there are exceptions.  But ordinarily a Chapter 7 discharge takes approximately 90 days.

There are some instances where it could take longer:  the bankruptcy trustee needs more information, you’ve delayed the personal financial management course, you are trying to discharge student loans, a creditor or the trustee objects or disagrees with your exemptions.  Hiring competent bankruptcy counsel will make everything go much smoother.

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Are you a slave to your private student loans?  We have client after client coming to see us with huge private student loans that are not going away, despite years of throwing money at them.  In fact, in most cases, the balances are larger, sometimes double what they used to be.  Let us help you get these loan balances and monthly payments to something sustainable, affordable and with an end in sight.

While as an attorney it is difficult to tell your clients that perhaps their best option is not to pay, I just ran across this article titled “Top Ten Reasons You Should Stop Paying Your Private Student Loan” from the Huffington Post which agrees with taking such a strategic default.  I have to say I agree with every one of their top ten reasons.  Please take a moment and review the article.  And we have taken this view for a while now, taking action on behalf of our clients to bring these unaffordable private student loans under control.

As HP points out, yes it will hurt your credit and that of any co-borrower.  Private student loans won’t negotiate with you for the most part when you are current.  They may start calling you demanding payment once you start missing payments.  This is where the consumer laws come into play.  Know your rights.  Review our website for actions you can take now to preserve your claims.  We file lawsuit for FDCPA, FCCPA and TCPA violations all the time.  This can lead to substantial reduction in the amount owed on your private student loans.

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This can be a sticky wicket.  I’ve never actually used that word in a sentence. 🙂 Normally you can buy a car before filing bankruptcy.  In fact, in some cases it can be a good idea (note: as a bankruptcy attorney I am not supposed to tell our clients to buy cars before filing).  But you should know that if you do pull the trigger to buy a car before filing you often can get a better interest rate or other financing terms than if you are actually in a bankruptcy.  You still have to pay to keep it of course.  But you’ll have a better idea of what your budget will be when you actually file for bankruptcy.  It’s a bad idea to have too high of a monthly payment also, so keep it within a sustainable amount.  Getting a replacement vehicle before you file can also be a good idea because then any future repairs will be covered by a warranty.  Once you are in bankruptcy, you likely won’t have extra money sitting around to fix a broken transmission, and would have to file motions to replace the car or obtain a short term stay of your plan payments if a Chapter 13.

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What about selling your car before filing?  Also a sticky wicket.  That’s twice now, I’m on a roll.  If you are selling for fair market value to a third party, all is good.  If you are giving your friend or family member the deal of a century that is an incredibly bad idea however.  The trustee can go get the car back and sell it at its real value for the benefit of your creditors.  It is best to keep a record of the transaction and deposit the funds in your bank account so the bankruptcy Trustee can see that the money actually was paid and where the money went.

So, what about trading in a vehicle?  Well, that also is not as black and white as you might think.  I’m done with the wicket thing.  If you are trading in a vehicle with a good amount of equity (maybe even free and clear) and you soon afterwards file a Chapter 7, the Trustee might not be too happy about it.  You see, to them, you’ve now liened up an asset that may have been over your exemptions.  They would have wanted to sell that free and clear vehicle to bring money into the bankruptcy estate.  Particularly if you don’t have any exemptions left to cover the equity in the vehicle.  But if the vehicle had a large lien on it and you’ve merely switched to another vehicle they likely won’t care.  If you are in a Chapter 13, it likely won’t make a bit of difference.  But be careful if you are filing Chapter 7 and make sure to obtain the advice of a good bankruptcy attorney before trading in your vehicle if it has equity.

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car exemptions bk  One of the common questions we get is whether or not someone filing bankruptcy can keep their car.  The answer is Yes, but you do have to pay to keep it.  How you do that depends upon how much equity is in the car, whether you own or lease, whether it is jointly owned, and whether you are current on the payments.  The information below applies to Florida exemptions, the laws may be different in other states and you may still be governed by another state’s exemptions if you’ve recently moved to Florida.

Chapter 13:  A Chapter 13 can be used to catch up on missed payments.  It also can be used to value an underwater vehicle that you have owned for more then 910 days to what it is worth now.  I’m sure you know this, but just in case, the phrase “underwater” means you owe more than it is worth.  If you are current on payments, and the vehicle is worth more or equal to what you owe you would just “pay direct” and simply inform the court that you are continuing to make monthly payments.  There is no need to reaffirm the vehicle, as the original credit agreement continues to exist throughout the bankruptcy.

Chapter 7:  You can also keep a vehicle in a Chapter 7.  In Florida, you are able to keep certain exempt property which includes $1,000 personal property, $1,000 vehicle equity, and a special exemption of $4,000 if you rent, or you do not own a home that you are keeping or otherwise receiving the benefit of a homestead.  So if you are able to claim all three exemptions, for a single debtor, that would mean you can keep $6,000 worth of vehicle or belongings.  Anything more than $6,000 you can make arrangements with the bankruptcy trustee to pay to keep.  So for example, if your vehicle is worth $10,000, but you still owe $8,000, that means you have $2,000 in equity.  If you also had $1,500 in personal belongings and $1,000 in the bank, you would have a total of $4,500 which would fall with the allotted $6,000 exemption.  You could keep the vehicle and just continue to make the payments.  In order to do so, the creditor will require you to sign a reaffirmation agreement which is essentially a new agreement to pay for the vehicle.  The terms are generally the same although in some cases the amount owed or interest rate can be negotiated down.

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ABC Action News ran a story about a Tampa student loan borrower tonight for whom we just filed an adversary lawsuit in bankruptcy court seeking an undue hardship.  Unfortunately he was duped into what is now $164,000 worth of student loans for a worthless degree from IADT.  Worst decision of his life.  In our interviews we got the news journalist to understand and communicate what a fraud the accreditation process is.  The differences between national and regional accreditation was a main focus of the story.  We’ve been trying to get the word out on this for awhile now.  Accreditation is not all equal.  Our client’s degree is in IT – not basket weaving.  But since it is from a nationally accredited school, this IT degree is essentially the same as a degree in basket weaving.  Most employers and educators do not recognize it as a valid degree.  If he wants to advance in his career he has to “do it all over again”.  This means late nights studying, time out of the workforce, more student loans…

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If you’d like to know more about why your nationally accredited school may not be what you think it is, see our earlier blog post Student Loan Nightmares at For-Profit Schools:  Have accreditation agencies dropped the ball?  For more info, please contact Arkovich Law

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